Chasing for yields

Credit costs have come down globally in this slow-growth economic climate. Most central banks are lowering their benchmark interest rates. Some central banks have reduced interest rates to negative, notably Japan, Sweden, Switzerland and Denmark. The Fed is holding interest rate unchanged in the wake of Brexit (UK leaving EU). The interest rate for the 10-year Treasury bills is now low at 1.58%. Some two years ago the interest rate was about 2.50%. This was a huge drop in interest rate of ONE percentage point.

When you cannot get decent yields from government bonds, where would you invest for better yields? Even when you invest in real estate investment trust (REIT) or some corporate bonds because the yields are higher, investors are subjected to diminution in capital sum invested. Take the recent example of Ausgroup corporate bonds. The bonds have slumped 23.4% this year. (Source: The Straits Times 19 July 2016).

When investing, one has to look at both income yield (by way of dividends or interests) and the possibility of not losing on the capital sum invested. If we throw in currency in the mix, eg investing in foreign currency denominated investments, then fluctuations in currency rates can cause you to lose a great deal when you are on the wrong side of the bet.

We are in an unstable global financial and economic environment. Investing can be tricky. Where do I get ideas for investing? I get them from two banks that I have relationship with. I read their news and sometimes my relationship manager called me to share some thoughts. Ultimately, I decide on what I intend to do. For most part, I stay safe and set up just a sum for some risk taking. This is an amount I can afford to lose. Bulk of it is still in cash or cash equivalent. I became active in looking at my portfolio during this uncertain period. I am prepared to cut loss and move funds to safer instruments. I have never been so concerned about investments since the Global Financial Crisis (2008/09).

Copyright © 2016, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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1 Response to Chasing for yields

  1. Pingback: Daily SG: 21 Jul 2016 – The Singapore Daily

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